As the Enron trial enters its final stretch, legal experts say the odds are stacked against Enron founder Ken Lay and former CEO Jeffrey Skilling.

By Shaheen Pasha, CNNMoney.com staff writer

May 5, 2006: 4:16 PM EDT

NEW YORK (CNNMoney.com) – It's not looking too pretty for Enron founder Kenneth Lay and former chief executive Jeffrey Skilling as the corporate trial of the century enters its final stretch.

With closing arguments just one week away, legal observers speculate that the scales have tipped in favor of the prosecution as Lay and Skilling's lackluster performance on the stand did little to endear them to jurors, or to support their assertions that Enron was the victim of market conditions that led to its ultimate demise.

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"I think that Lay and Skilling are both in a lot of trouble," said Jacob Zamansky, a former federal prosecutor and principle of Zamansky & Associates, a New York-based law firm that represents investors. "Lay came off as an angry, defensive CEO and not the warm and fuzzy guy he needed to be. And Skilling looked like a cold and calculating executive who left Enron under suspicious circumstances."

While Skilling managed to keep his cool under direct-examination, he lost his temper repeatedly under cross-examination adding credibility to the prosecution's contention that his demeanor was just for show.

From the beginning, the defense faced an uphill battle as they attempted to convince jurors that Lay and Skilling are not only innocent of the crimes they've been accused of but that there was no actual crime committed at Enron, with the exception of the millions of dollars former financial chief Andrew Fastow and his minions siphoned off from the company.

But with the defense's inability to bring forth any high-level executives to support their theory, it was up to Lay and Skilling to fend for themselves. They tried to paint a picture of Enron as a solid company that was brought to its knees by a mixture of bad press, the greed of short sellers and a skittish market that was unforgiving of Fastow's misconduct at the company.

And to that end, neither defendant was particularly convincing, legal experts said.

"The bottom line is there is one question that hasn't been answered: why Enron fell apart," said Joel Androphy, a white-collar defense attorney at Houston-based law firm Berg & Androphy. "Lay and Skilling kept professing that market forces caused its decline and ultimate disintegration but we haven't heard any actual evidence about that."

A far-fetched defense

Legal experts said the defendants' assertions that media was attacking the company at the behest of short-sellers who had gathered at a secret meeting in Florida in early 2001, seemed far-fetched as a defense.

By contrast, the government presented 22 witnesses that pointed the finger at both defendants and testified that they created an environment of corruption in which success had to be achieved at all cost.

Skilling's abrupt departure in August 2001, which set off a chain of events that led to Enron's bankruptcy in December, as well as his weak explanations for the stock sales he made around the same time, could also prove damning.

Still, it was Skilling that turned out to be the surprise charmer on the stand as he sought to repair the government's portrayal of him as a man so consumed with greed and power that he ultimately brought down the company he helped build.

Gone was the brash, temperamental villain jurors had heard about as Skilling opted for a more subdued, congenial demeanor on the stand, even as he vehemently defended his innocence and tried to explain that he left Enron for personal reasons – a decision he said he regrets. And at least one juror seemed to respond positively to Skilling's attorney Daniel Petrocelli, a positive for his defense.

Thomas Ajamie, a securities law expert attending the trial, said Skilling was successful in showing jurors that Enron's business was a lot more complicated than the government was trying to present. While prosecutors have made the Enron case a black-and-white, right-or-wrong issue, the defense contends that the company's accounting and complex financial structure may have been aggressive but fell within the letter of the law.

Skilling played the part of professor as he walked the jurors through some of the more complicated financial transactions Enron undertook. That complexity bolstered the defense's assertions that Lay and Skilling had to rely on the advice of internal and accounting experts and attorneys who signed off on the company's activities.

"He explained in a lot more detail the nuances and complexities of running a company the size of Enron," Ajamie said. "If I had to call it, my guess is that he won't be convicted on all 28 charges against him. He may still be convicted but on fewer charges."

Lay under attack

But Lay could turn out to be a surprise negative for the defense. His amiable persona took a beating on the stand as he failed to connect with jurors or adequately explain the $70 million in stock sales he made just months before Enron collapsed.

Going into the trial, many legal observers thought the case against Lay was weak because the prosecution largely based its case against Lay on the optimistic comments he made to Wall Street in Enron's final months. Prosecutors contend he was aware of Enron's troubles but was deliberately misleading the public to lift Enron's stock price.

Lay was also considered to be a lot more folksy and thus a better bet with jurors.

But the man on the stand turned out to be a far cry from his image as he sparred with prosecutors and appeared testy and overbearing with his own attorney, George "Mac" Secrest. That could hurt him as jurors enter deliberation.

His explanation that the $70 million worth of stock he sold in 2001 were "forced sales" to meet margin calls seemed dubious -- especially when contrasted with the lavish lifestyle that the government showed jurors Lay enjoyed.

"From a practical matter, the case is going to be decided [based] on the personal gain that each of them obtained as a result of how Enron unfolded," said Michael Wynne, a former federal prosecutor and now a trial attorney for litigation firm Yetter & Warden in Houston. "Lay just destroyed his case on the stand."

Androphy, of the law firm Berg & Androphy, said Lay failed to explain why he was optimistic about Enron in the fall of 2001. And he said Lay would have been better off admitting that he mishandled the warnings presented to him by then-vice president Sherron Watkins who predicted that Enron would "implode in a wave of accounting scandals."

But he said that Lay did manage to do a borderline job explaining that while he made mistakes at the company, that's not necessarily a criminal offense. And jurors may be divided on whether he consciously chose to ignore warning signs that Enron was in trouble.

"There is never going to be an acquittal," Androphy said. "But I think Lay's got a decent shot at a hung jury."

He added that if there is a hung jury, it would be because jurors questioned the credibility of the prosecution's witnesses – many of whom have pled guilty to crimes and entered cooperation deals with the government for a reduced sentence.

Combined, Lay and Skilling face almost three dozen charges of fraud and conspiracy, and could get 20 to 30 years behind bars if convicted. Lay will also face a trial for bank fraud once jurors begin deliberations in the current case.

Enron's 2001 bankruptcy was the largest in history at the time and cost 4,000 employees their jobs and many of them their life savings, leading to billions of dollars of losses for investors. Enron was once the nation's seventh-largest company.